By ‘positioning’ we mean the way a product is viewed by the customers in comparison with similar products. Price is just one element of the marketing mix and it must reflect the product’s position in the market.
A toilet soap meant to be a novelty to attract the elite must be sold at a higher price. This is the basic idea behind product differentiation, i.e. to avoid a situation where the product has to compete only on the basis of price.
Pricing is an important element of the marketing mix. Pricing is affected not only by the cost of manufacturing the product but also by:
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- The company’s objectives in relation to market share and sales
- The nature and intensity of competition
- Stage of the product life-cycle at which the product is currently positioned
- Nature of product whether as consumer or industrial product and if
- The former, whether it is a luxury or necessity. Before making any pricing decision it is important to understand all these factors.
There are various methods of pricing. The four most commonly used methods are full cost pricing, pricing for the rate of return, going rate pricing, and customary pricing. While the first two methods are based on the costs incurred, the latter methods are based on the competition’s pricing.
While from the company’s point of view, price represents a kind of ‘maximum’ that it can charge given its own costs and the nature of competition, from the customer’s viewpoint it is a representation of the quality of the product.
In conclusion, pricing policies are considered one of the most marketing mix elements. Psychological pricing affects mainly one consumer, to another.
The importance attached to the price of a company’s product by the consumer is of significant importance to marketing activities. Thus, in fixing a price for a product, marketing executives should consider necessary pricing policies and other market elements.
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